Midas Holdings

MAYBANK KIM ENG, Sept 10

LAST weekend, China Railway Corp (CRC) announced the result of its first high-speed train tender in the past two years.

A total of 159 train sets order have been split between CSR (108 train sets) and CNR (51 train sets). We believe this is just the beginning of a new train purchase cycle by the Chinese government.

As one of the key suppliers to CSR and CNR, we expect Midas to win around RMB250-300 million contracts in the high-speed train sector this year and RMB1 billion each year in FY14/15.

We continue to like Midas as we expect positive news flow and contract wins to continue to drive the share price up.

Maintain "buy" and target price S$0.75, pegged to 1.5x P/B. We believe short-term share price drivers for Midas will continue to be news flow and contract wins before earnings delivery in H2 FY14.

Historically Midas' P/B closely followed its order book, which makes us believe that currently undemanding P/B multiples deserve a rerating if order book could be substantially boosted to RMB1 billion or above.

BUY